Summer School on Gender Economics and Society Torino July 6-10 2015 Francesca Bettio Gender Income Gaps and Inequality Università di Siena
This lecture • Are gender income gaps closing? • Are we looking at the ‘right’ gaps? • Do ‘composite’ gaps matter for inequality ? • Inequality and economic independence
Wage gap closing ? Views from across the Atlantic (From Blau and Kahn 2007) «…while precisely how much narrowing we will see in the future is an open question , the gender pay gap seems unlikely to vanish in the near future..
A different view from C. Goldin (2014 AER) ……….A gender gap in earnings exists today that greatly expands with age, to some point, and differs significantly by occupation. The gap is much lower than it had once been and the decline has been largely due to an increase in the productive human capital of women relative to men. …. The portion of the difference in earnings by gender that was once due to differences in productive characteristics has largely been eliminated. …What, then, is the cause of the remaining pay gap? Quite simply the gap exists because … in many occupations earnings have a nonlinear relationship with respect to hours. A flexible schedule often comes at a high price, particularly in the corporate, financial, and legal worlds. True? The strongest evidence is from legal USA studios, with notoriously long hours, but a different explanation has been given for long hours, by Landers et al. (1996) AER (Rat’s race redux…)
On this side of the Atlantic The trend in USA is remarkably similar to that in the UK. In other EU countries progress is more contained as the initial gap was lower. Everywhere progress slowed down from the 1990s and there is convergence to gaps between 10 and 20%. Trends in gender wage gaps in median earnings of full-time employees, 1970 to 2011 (OECD estimates)
Which gaps? • Median or annual gaps for full-timers are a (second best) measures if the attempt is to control for differences in hours worked . First best is the wage rate gap. • Prevalent focus on the wage rate is partly the result of the dominance of certain discrimination theories in the analysis of gender differences (more later) Yet, differences in hours worked still are key determinants • of women’s choice of occupations (Bettio and Verahshagina 2009) • If we factor in differences in hours worked, other income gaps are worth investigating
The labour income gap Gaps in annual labour income are much larger and progress probably slower Gender gap in net monthly labour income. Italy 0,35 0,30 0,25 % gap 0,20 0,15 0,10 1970 1975 1980 1984 1989 1995 2000 2004 2008 2012 Italy: the OECD estimate for the gap in median earnigs for full-timers was around 10% in 2009. The gap in annual net labour income was 24% in the same period (SHIV data) . And progress has been modest over the past 40 years
Eurostat proposal (1): TOTAL EARNINGS GAP where TEG : Total earnings gap Em — Mean hourly earnings of men, Hm — Mean monthly hours paid to men, ERm — Employment rate of men (aged 15-64), Ew — Mean hourly earnings of women, Hw — Mean monthly hours paid to women, ERw — Employment rate of women (aged 15-64).
The gaps of the components (gender 37.1% pay gap - GPG, gender hours' gap - GHG and gender employment rate gap - ERG) do not add up to the total earnings gap (TEG). However, the following relationship holds: (1- GPG/100) x (1 – GHG/100) x (1 – ERG/100) = (1-TEG/100) In log terms: LN(1- GPG/100) + LN(1 – GHG/100) +LN (1 – ERG/100) = LN(1-TEG/100). This allows calculating contributions as follows (e.g. for GPG): LN(1-GPG/100) / LN(1-TEG/100) x 100.
THE GRAY HAIR GAP The natural sequel to the gap in the TEG is the gap in pension income, expected to be adopted as an ‘offical’ indicator by the EU. Only recently has the gap in pension been drawing attention in European policy circles (not so much in academia) because expected years as a pensioner are getting closer to expected years in the labour market . See Bettio et al (2013) http://ec.europa.eu/justice/genderequality/files/documents/130530_pensions_en.pdf
Gender Gaps in pension income and pension coverage. EU and USA around 2010 EU27 USA Gap in coverage rate, persons 65+ (%) Overall (men-women c.r, %) 6.3 0.3 Social Security 0.2 Occupational plans 9.2 Gap in Pension Income, pensioners 65+ (mean,%) 38.6 30.6 The Gender Gap In Pensions is the ratio of the difference in average pension income between men and women to the pension income for men. The Coverage Gap is the difference between the coverage rate for men and that for women, i.e. the difference in the ratio between men (women) receiving at least one type of pension to the reference population. Source: EU-SILC 2011, HRS 2010 (Rand Files), own estimations: Betti et al. (forthcoming 2014)
Can we discern trends in the Gender gaps in pension gap over time? pensions: Questions & answers Gender Gap in Pensions in the EU-27 40,8 40,7 40,6 40,2 40,1 38,7 38,7 38,6 38,5 40 37,6 Comparing points five 30 years apart (2008 and 2012) a mixed picture 20 emerges for the different European countries . Whereas on 10 average there is a widening of gaps, this 0 masks opposing trends. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Overall, no clear 65+ 65-79 indication that the gap will close soon
Gender gaps in Are gender gaps higher where pensions pensions: are higher? In some countries the gap Questions & rises with income in others it falls; the answers picture is different across Europe What are the likely effect of expanding the so • called multi-pillar system ? So called second pillar (occupational pension schemes) systems are well established in a small number of EU countries (DK; NL CH). Here the composite of the two pillars has a wider gender gap than the public pillar on its own. What are the key determinants? Short careers, • low education, being married and having children, all tend to widen the gap, although the relationship is not one to one in all countries because, often, system features counteract the effect of these factors.
Gaps and theories • labour income or pension income gaps are increasingly concerning policy makers. Less so economists Why ? • Good reasons: they are ‘composite’ gaps reflecting decision making processes that are best theorized separately, i.e. hourly wages and how many hours to work • Bad reason: obsession with the wage rate and discrimination theory has obscured the fact that economic behaviour also depends on composite outcomes such as pensions or earnings • Financial independence, as well as poverty and inequality are outcomes of composite decision making processes and they are key issues from a gender perspective
The good reasons Focus on discrimination theory and the wage rate has brought a • great deal of knowledge about why women might receive lower rates. But are we near saturation point? Some of the latest additions to the existing body of knowledge are • - non cognitive skills (such as assertiveness) : Grove, Hussey & Jetter (2011) JHR - differential attitutudes towards risk: Le et al. (2011) Labour Economics - differential competive drives: Manning, and Saidi (2010 Industrial and Labor Relations Review - wage premiums on long /continuous hours: Goldin (2014) AER (or compensating wage differentials)
The not so good reasons • Obsession with theories of discrimination has meant that the only relevant gap worth analysing and monitoring is the hourly (adjusted) gap • Discrimination persists but there is wide agreement that it is far less important today than it may have been in the past • Yet ‘path dependency’ in the production of economic theorizing means that different approaches and issues have been relatively neglected • A case in point is the household bargaining approach
Household bargaining and intra- households gaps • Household bargaining pivots on a notion of economic independence of own kind, that of fall back position • Key gaps in this approach are intra-household gaps , i.e. disparities between members of a given couple. • Relevant intra-household gaps are not only gaps in wage rates but also in total earnings/income. • The approach is not new, but intra-household gaps are not so popular. (yet?) We know little about such gaps. But we know that they • may be larger than the corresponding aggregate gaps.
Intra-household gaps in pension income. Europe (EU_SILC 2011) Median Intra-household Gender Pensioners' Gap (%) 100 87 90 80 70 62 61 59 55 60 45 45 47 50 41 44 38 34 33 40 35 33 30 29 31 26 24 28 30 23 18 18 16 16 17 13 20 9 8 10 1 0 CY CH SI FI CZ LU DE UK N L AT EU_27 FR IE BG ES IT SE PT RO GR N O BE PL IS M T HU LV SK LT DK EE Source : Betti, Bettio, Tinios and Georgiadis (20144, forthcoming) The intra-household median gap in pensions dominates the aggregate gender gap in median pensions in all the countries except in Estonia, Greece, Ireland, Latvia, Romania and Slovenia . This is largely due to a population sample effect. But values are likely to remain high after netting the selection effect out .
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